California Supreme Court holds that employees may bring and maintain PAGA claims even when they settle their individual claims or have no individual claims at all.

The wage-and-hour bar was thrown for a bit of a loop with the 2nd District Court of Appeal’s opinion in Kim v. Reins International California, Inc. (click here for my blog writeup on the appellate opinion and the problematic and unanswered questions left by that opinion).

In Kim, the trial court stayed the plaintiff’s enforcement claim brought under the Labor Code Private Attorneys General Act of 2004 (Labor Code section 2698 et seq.) (“PAGA”) and ordered the individual claims to arbitration. The defendant issued a statutory offer to compromise under Code of Civil Procedure section 998 on the individual claims only, and the plaintiff accepted. The trial court then granted the defendant’s motion to dismiss the PAGA claim on grounds that the plaintiff was no longer an “aggrieved employee” under the PAGA and therefore had no standing to maintain the PAGA claim. The California Supreme Court took up the matter, and many of us guessed that the Cal. Supremes would reverse.

Yesterday, that just happened.

On March 12, 2020, the California Supreme Court unanimously reversed, holding that settlement of individual claims does not result in an employee losing “aggrieved employee” status under PAGA. (If you’re new to PAGA, the Kim opinion is a good primer on PAGA, including its purpose, interpretation, legislative history, and current state.) (Slip opinion linked here.)

Here’s the short and skinny.

Based on the plain statutory language, PAGA standing only requires that the plaintiff have been employed by the alleged violator and have suffered one or more Labor Code violations (slip op. at 6)—it does not require that the plaintiff suffer actual, legally cognizable injury, or any injury for which there is a private claim or right of action (id. at 6-8). It’s the violation of the Labor Code—not the availability of a claim or remedy—that triggers aggrieved-employee status. Because standing does not require the availability of a private claim or right of action, it didn’t matter that the plaintiff no longer had any remaining private claims (having already settled those by accepting the defendant’s 998 offer):

Reins contends Kim is no longer an “aggrieved employee” because he accepted compensation for his injury. The logic here is illusive. The Legislature defined PAGA standing in terms of violations, not injury. Kim became an aggrieved employee, and had PAGA standing, when one or more Labor Code violations were committed against him. (See § 2699(c).) Settlement did not nullify these violations. The remedy for a Labor Code violation, through settlement or other means, is distinct from the fact of the violation itself. . . .

Further, Reins’s assertion that a PAGA plaintiff is no longer “aggrieved” once individual claims are resolved is at odds with the Legislature’s explicit definition. Section 2699(c) defines an “aggrieved employee” as “any person who was employed by the alleged violator and against whom one or more of the alleged violations was committed.” It does not require the employee to claim that any economic injury resulted from the alleged violations. “ ‘ “When a statute prescribes the meaning to be given to particular terms used by it, that meaning is generally binding on the courts.” ’ ” (Security Pacific National Bank v. Wozab (1990) 51 Cal.3d 991, 998.) Reins’s use of “aggrieved” as synonymous with having an unredressed injury is at odds with the statutory definition.

Reins’s interpretation would add an expiration element to the statutory definition of standing. It would expand section 2699(c) to provide that an employee who accepts a settlement for individual damage claims is no longer aggrieved. Of course, the Legislature said no such thing. In construing a statute, we are “ ‘careful not to add requirements to those already supplied by the Legislature.’ ” (Ennabe v. Manosa (2014) 58 Cal.4th 697, 719.) . . . . If the Legislature intended to limit PAGA standing to employees with unresolved compensatory claims when such claims have been alleged, it could have worded the statute accordingly. . . .

The statutory language reflects that the Legislature did not intend to link PAGA standing to the maintenance of individual claims when such claims have been alleged. An employee has PAGA standing if “one or more of the alleged violations was committed” against him. (§ 2699(c), italics added.) This language indicates that PAGA standing is not inextricably linked to the plaintiff’s own injury. Employees who were subjected to at least one unlawful practice have standing to serve as PAGA representatives even if they did not personally experience each and every alleged violation. (§ 2699(c).) This expansive approach to standing serves the state’s interest in vigorous enforcement. (See Arias, supra, 46 Cal.4th at pp. 980- 981.)

Id. at 7-9.

That’s the basis of the holding.

The Cal. Supremes also supported the holding with a discussion of the statutory purpose behind the PAGA: the purpose of a PAGA claim is not to redress injury but instead to ensure enforcement of the Labor Code via private attorneys general acting as proxies of the state. See id. at 10-11. This is different than in a class action, where a settling plaintiff no longer has any interest in the class action. Id. at 11.

And if settling or paying individual claims could eliminate statutory penalties, violators could avoid later civil penalties sought by the state for the violations. Id. at 12. These individual settlements would escape “the safeguards of PAGA settlements, which require notice to the LWDA and court oversight,” and would reduce exposure to civil penalties “without state oversight and contrary to PAGA’s goal of strengthening Labor Code enforcement.” Id. at 12-13.

Further, standing for PAGA claims cannot depend on the maintenance of an individual claim. Often in PAGA cases, individual relief is not even sought. Id. at 13-14.

Finally, and what I wrote about at some length here, the appellate holding would result in a major inconsistency with a key purpose of: the ability to enforce Labor Code provisions for which there is no private right of action at all:

Premising PAGA standing on the existence of an unredressed injury would also be inconsistent with numerous Labor Code statutes that impose civil penalties without affording a private right of action. The Legislature authorized PAGA actions for a broad range of Labor Code violations. (See § 2699.5.) While these statutes all describe prohibited conduct, many do not authorize individual damage suits by employees. “ ‘[W]hen regulatory statutes provide a comprehensive scheme for enforcement by an administrative agency,’ ” as with the Labor Code, “ ‘courts ordinarily conclude that the Legislature intended the administrative remedy to be exclusive unless the statutory language or legislative history clearly indicates an intent to create a private right of action.’ ” (Thurman v. Bayshore Transit Management, Inc. (2012) 203 Cal.App.4th 1112, 1132, disapproved on another ground in ZB, N.A. v. Superior Court, supra, 8 Cal.5th at p. 196, fn. 8.) Decisions examining specific Labor Code provisions enforceable under PAGA have frequently concluded that the statutes in question do not support a private right to sue. Lu v. Hawaiian Gardens Casino, Inc. (2010) 50 Cal.4th 592, 601, for example, held there is no private right of action under section 351, which prohibits employers from taking employees’ tips. (Lu, at p. 601.) Nor can employees misclassified as independent contractors sue for relief directly under section 226.8. (Noe v. Superior Court (2015) 237 Cal.App.4th 316, 337-341; cf. Thurman, at p. 1132 [no private right of action for employees to enforce an Industrial Welfare Commission wage order].) Most recently, we concluded employees have no private right of action to pursue unpaid wages under section 558. (ZB, at p. 188.)

The availability of civil penalties for statutes that provide no individual relief highlights the flaw in Reins’s conception of PAGA standing. In Reins’s view, PAGA standing requires that the plaintiff have an unredressed injury. But plaintiffs cannot address a claimed injury by private suit unless the statute permits it. The concept of injury is especially inapposite in this context. Requiring the existence of an unredressed injury to support standing would be problematic for PAGA suits to enforce the many Labor Code statutes that do not create a private right to sue. Indeed, the very reason the Legislature enacted PAGA was to enhance enforcement of provisions punishable only through government-initiated proceedings. (See Iskanian, supra, 59 Cal.4th at p. 379; Arias, supra, 46 Cal.4th at pp. 980-981.) Reins’s formulation of standing would contravene this remedial purpose.

Id. at 14-15.

Judgment reversed.

Whether one agrees with the existence of PAGA as good policy or not or acknowledges or believes that PAGA is misused and abused is another topic. But absent amendment by the Legislature, this holding by the Cal. Supremes seemed like the only possible result. In my many, many PAGA mediations I’ve had, I can’t remember a single PAGA attorney believing there was a good chance of the appellate holding being affirmed.

At the least, this ambiguity in the law is now removed so that parties and attorneys have more guidance when litigating their PAGA matters.